IES Holdings, Inc. (IESC) | The Buildout — AI Infrastructure
The Verdict
IES Holdings designs and installs electrical and technology systems and makes the hardware that goes around them. Its Communications segment builds network infrastructure inside data centers — network systems, audio/visual, telephone, fire, wireless access and intrusion alarm. Its Infrastructure Solutions segment manufactures custom generator enclosures that the 10-K describes as used in data centers and other industrial applications, along with custom power distribution equipment, metal enclosed bus duct and structural steel fabrication. Its Commercial & Industrial segment does electrical and mechanical design, construction and maintenance, with nationwide expertise in power infrastructure and data centers. The company sits at the physical layer of the AI build-out: the wiring, power and backup generation inside the buildings, not the compute inside them.
| Market Cap | — |
| Revenue (TTM) | $4.0B |
| Revenue Growth | +22.7% |
| EBITDA Margin (TTM) | 13.5% |
| Net Cash | $311M |
| Earnings Beats | 3 of 4 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Total backlog reached $3,862.1 million at March 31, 2026, up 113.1% year over year, concentrated in the three data-center and power segments.
- Communications revenue rose 34.6% in fiscal Q2 2026 and the segment's backlog more than doubled to $1,377.3 million.
- Commercial & Industrial gross margin expanded to 28.6% from 21.4%; the company attributed the gain to strong execution on certain large data center projects.
- About $1,839.2 million of enforceable remaining performance obligations was expected to convert to revenue within 12 months — roughly 78% of the $2,347.1 million RPO balance.
- Management raised its fiscal 2026 capital spending outlook to $145 million–$160 million to support organic growth, and the balance sheet remains net cash at $310.9 million.
What We’re Watching
- $1,515.0 million of the $3,862.1 million backlog is agreements without an enforceable obligation; in Infrastructure Solutions, only $281.5 million of $1,019.8 million is enforceable RPO.
- Residential operating income fell to $6.4 million from $22.7 million in fiscal Q2 2026, and one unnamed Residential customer was 12.0% of consolidated revenue in FY2024 and FY2023.
- Communications fixed-price work was about 61.6% of segment revenue in the first half of fiscal 2026, which carries estimate and cost risk.
- The pending DBM Global acquisition is about $650 million in cash and IES common stock with no closing date given, and Gulf Island is still loss-making while being repositioned.
The thesis is strengthening on the disclosed evidence. Backlog, segment profit and margins all moved the right way in the data-center-linked segments, and management is investing behind them with a substantially higher capital budget. The counterweights are Residential, which is shrinking and much less profitable, and an order book that is only partly enforceable. Because the company does not disclose how much revenue or backlog is specifically AI or data-center related, the size of the AI exposure cannot be measured from the record. The key open question is whether the non-enforceable portion of backlog converts into enforceable work — and if it does, whether Commercial & Industrial margins hold near 28.6%.
Earnings Beat
IES reported fiscal Q3 2026 revenue of $1,242.7 million, up 39.6% from $890.2 million a year earlier and 27.6% above the prior quarter. Gross margin was 27.4% versus 26.9% a year earlier. EBITDA was $195.5 million, a 15.7% margin, up from $123.6 million and 13.9%. Free cash flow was negative $15.1 million for the quarter.
| Metric | Q3 FY2026 | Q2 FY2026 | Q3 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $1.2B | $974M | $890M | +39.6% |
| Gross margin | 27.4% | 24.5% | 26.9% | +50bps |
| EBITDA | $196M | $128M | $124M | +58.2% |
| EPS | $3.79 | $2.72 | $1.91 | +98.2% |
| Backlog (non-GAAP, as of Mar 31, 2026) | $3,862.1M | $2,373.8M | $1,812.7M | +113.1% |
Management tone: No earnings call on record for the latest period. The most recent management commentary comes from the fiscal Q2 2026 press release and 10-Q MD&A, and the posture is expansionary: management substantially raised the fiscal 2026 capital spending outlook to support organic growth, pointed to multi-family backlog growth as a fiscal 2027 benefit, and acknowledged continued Residential pressure and that Gulf Island is not yet contributing meaningfully to earnings.
Management Guidance
IES provided no formal revenue or EPS guidance. The operative forward statements are about capital spending and two acquisition-related expectations. Management said it had raised its expected capital expenditure forecast for fiscal 2026 to a range of $145 million to $160 million, described in the release as "substantially raising our capital spending outlook for the remainder of fiscal 2026 to support the organic growth." On Gulf Island, management said it does not expect the acquisition to contribute meaningfully to earnings during the current fiscal year as it adds equipment and repositions operations, but does expect results to benefit in fiscal 2027. On Residential, management said growth in multi-family backlog through the first half of fiscal 2026 "should benefit us in fiscal 2027."
Trajectory
Revenue has stepped up through fiscal 2026: $871.0 million in Q1, $974.2 million in Q2, then $1,242.7 million in Q3, which grew 39.6% year over year. Gross margin reached 27.4% in Q3 against 26.9% a year earlier, and EBITDA margin moved to 15.7% from 13.9%. The disclosed driver is mix. Communications installs data-center network infrastructure and grew 34.6% in Q2, Commercial & Industrial gross margin reached 28.6% on strong execution on large data center projects, and Residential contracted while its gross margin fell to 21.5% from 25.1% on weaker demand and customer pricing pressure.
The Model
The model projects FY+1 revenue of $5,590.0 million and EBITDA of $872 million, a 15.6% margin, rising to FY+2 revenue of $6,550 million and EBITDA of $1,061 million, a 16.2% margin. The near-term anchor is the order book: $1,839.2 million of enforceable remaining performance obligations was scheduled to convert within 12 months as of March 31, 2026, and total backlog stood at $3,862.1 million. FY+2 depends on the company's own stated expectations — Gulf Island contributing in fiscal 2027 and multi-family backlog growth benefiting Residential — plus whatever the pending DBM Global acquisition adds.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $3.4B | $5.6B | $6.5B |
| YoY Growth | — | +65.8% | +17.2% |
| EBITDA | $431M | $872M | $1.1B |
| EBITDA Margin | 12.8% | 15.6% | 16.2% |
Projections are the median of 5 independent model runs. The model’s revenue sits 3.7% above analyst consensus.
IES provided no formal revenue or EPS guidance. The operative forward statements are about capital spending and two acquisition-related expectations. Management said it had raised its expected capital expenditure forecast for fiscal 2026 to a range of $145 million to $160 million, described in the release as "substantially raising our capital spending outlook for the remainder of fiscal 2026 to support the organic growth." On Gulf Island, management said it does not expect the acquisition to contribute meaningfully to earnings during the current fiscal year as it adds equipment and repositions operations, but does expect results to benefit in fiscal 2027. On Residential, management said growth in multi-family backlog through the first half of fiscal 2026 "should benefit us in fiscal 2027."
What Could Go Right — and Wrong
- Reported backlog converts to revenue, particularly the $1,377.3 million Communications and $1,082.4 million Commercial & Industrial books.
- Commercial & Industrial gross margin holds near 28.6% as data-center revenue scales.
- Gulf Island is repositioned and delivers the fiscal 2027 benefit management expects.
- Multi-family backlog growth converts and Residential stops being a drag.
- DBM Global closes and adds structural steel fabrication, erection and industrial services at scale.
- The $1,515.0 million of backlog that is not yet an enforceable obligation fails to convert, shrinking real forward coverage.
- Commercial & Industrial gross margin reverts toward the prior 21.4% if 28.6% was project-specific.
- Residential keeps declining on weaker demand and customer pricing pressure.
- Lead-time and commodity pressure delays projects or compresses margins.
- Integration strain: Gulf Island is loss-making while repositioned, and DBM Global is about $650 million, partly stock-funded.
Looking Ahead
Over the next 12 months the questions are conversion and complexity. About $1.84 billion of enforceable remaining performance obligations is scheduled to convert to revenue, and total backlog was roughly four times quarterly revenue at March 31, 2026. Management has raised fiscal 2026 capital spending to $145 million–$160 million to fund organic growth. The DBM Global acquisition is signed but has no closing date in the source material, and the two-for-one stock split announced July 31, 2026 has no record or effective date disclosed.
- Fiscal 2026Capex spending of $145M–$160M — Watch actual spend and what it buys to enable organic growth.
- No closing date givenDBM Global acquisition closes — ~$650M cash-and-stock deal adds structural steel fabrication and erection.
- Record and effective date not statedTwo-for-one stock split — Future per-share figures will need restating for the doubled share count.
- Fiscal 2027Gulf Island contribution — Management expects the acquisition to begin benefiting results then.
- Fiscal 2027Multi-family backlog benefit — Growth in Residential multi-family backlog should show up in revenue.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $2.9B | $3.4B | $4.0B | +16.9% |
| Gross Margin | 24.1% | 25.4% | 25.9% | +135bps |
| EBITDA | $338M | $431M | $538M | +27.4% |
| EBITDA Margin | 11.7% | 12.8% | 13.5% | +106bps |
| Net Income | $219M | $306M | $456M | +39.6% |
| Free Cash Flow | $189M | $219M | $228M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)25.9%
- EBITDA Margin (TTM)13.5%
- Net Margin (TTM)11.4%
- ROIC42.4%
- FCF Conversion42.4%
- SBC / Revenue0.4%
The Company
IES Holdings designs and installs integrated electrical and technology systems and provides infrastructure products and services, serving data centers, residential housing, and commercial and industrial facilities. It runs four segments. Communications is a nationwide provider of technology-infrastructure services, including design, build and maintenance of communications infrastructure inside data centers; the 10-K states that it 'is a leading provider of network infrastructure solutions for data centers and other mission critical environments.' Residential does regional electrical installation for single-family and multi-family housing, plus HVAC and plumbing in certain markets. Infrastructure Solutions makes electro-mechanical products for industrial operations — custom generator enclosures, custom power distribution equipment, metal enclosed bus duct, structural steel fabrication, motor repair and more. Commercial & Industrial handles electrical and mechanical design, construction and maintenance, with nationwide expertise in power infrastructure and data centers. The company is broader than a traditional electrical contractor: it both installs systems and manufactures physical equipment.
IES operates its segments with separate headquarters and footprints. Communications is based in Tempe, Arizona, with 41 offices; Residential in Sugar Land, Texas, with 99 locations; Infrastructure Solutions in Massillon, Ohio, with 15 locations across ten states; and Commercial & Industrial in Houston, Texas, with 17 locations. The executive office is leased in Greenwich, Connecticut. The company has been adding scale through acquisitions. Gulf Island Fabrication closed January 16, 2026 for about $152.0 million net of cash acquired and became part of Infrastructure Solutions. A much larger transaction, the pending acquisition of DBM Global for approximately $650 million in cash and IES common stock, would add a vertically integrated structural steel fabrication, erection and industrial services platform.
Business Segments
Competitive Landscape
The source material documents two competitors, EMCOR and Everus Construction, and describes national-scale contractors converting the same data-center and electrical-construction demand into record backlogs. IESC does not disclose its data-center revenue or win rate, so there is no direct evidence in the source set about how much share it is capturing. The company's own filings do not name or discuss competitors; the two names come from the supplied relationship map.
- EMCOR (EME)Named in filings; not discussed by IESC. Documented as a competitor in the supplied relationship material.
- Everus Construction (ECG)Named in filings; not discussed by IESC. Documented as a competitor in the supplied relationship material.
Supply Chain
IESC sits between electrical-equipment, generator and steel suppliers and its data-center, residential and commercial customers. No supplier relationship is disclosed in the supplied filings; the names below come from a generated relationship map, not from documented quotes.